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America's Decline in the Chinese Century -- Red Alert Book Review

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Two authors, with backgrounds in finance, warn that the ineptitude of Washington's bureaucrats will accelerate the U.S. endgame as world superpower. That feat will occur in the era of Chinese ascendency.

The politicians, they claim, are failing to see America's core problems, let alone find a way to solve them. Without a cure, the U.S. will suffer a debilitating, economic slide far worse than the 2008 Crash, losing spheres of influence in the world arena and leverage of its political clout.

Beltway inaction threatens our way of life. Its bad policies are putting the U.S. on course to be Greece in 20 years. If nothing is done, you can bet the fires of Athens will come to many U.S. cities; the Occupy Wall Street movement was just a preamble.

The books, Red Alert by Dr. Stephen Leeb and What the U.S. Can Learn from China by NYU Finance Professor Ann Lee, are those warning beacons that have been fired into the American sky. Like flares, they illuminate the trouble spots that lie ahead. Poorly crafted policies, no manifest vision, and the inability of the two parties to come together at a critical moment are some of the pitfalls exposed by the authors.

Although they start on different tracks in their books, they arrive at the same stark truth: If the U.S. does nothing to combat its inertia it will lose the century. Then the U.S. will join other lost empires, from Egypt and Rome in the ancient world, to Spain and England, as historical footnotes.

Authors on a Mission

Ann Lee's book, reviewed by this author, delivers on themes of meritocracy and America's broken moral compass. In the former, she points out that the U.S. should adopt China's system of "merits," earning one's way up the political ladder like a CEO, as opposed to the crony capitalism that has put too many incompetent people in charge of myriad government agencies.

China puts chemical engineers and other diverse educated men in seats of power compared to the glut of lawyers that crowd American politics. Dr. Leeb added, "China graduates 700,000 engineers a year, while the U.S. only 65,000." Calculated over the next decade, it will be any wonder how the U.S. would compete with the Chinese economic engine.

Stephen Leeb writes on the theme of economic warfare. Red Alert wastes little time in guiding the reader to its central thesis: Commodities, from oil to rare earth metals, will dominate future trade and industry in two keys areas of energy and technology.

What too many in the media and government have overlooked is the importance of commodities. In contacting the author on this issue, he replied: "The specter of China spending billions mining copper in Afghanistan, while we spend billions fighting a war should have been a wake-up call -- it wasn't.

"The West remains remarkably complacent and ignorant. Recently, The Economist argued that we don't need to worry about rare earths, as there were many large deposits outside China. It listed Molycorp as an example. But failed to mention that because of our lack of refining, separating, and intellectual capital, we send the ore to China to be processed. There are huge ore bodies in Canada (Avalon) which, without the equivalent of a Manhattan Project, could take a decade or more to bring online."

In a stroke of coincidence (or good planning), Bloomberg Link invited both authors to speak at its Feb. 1 China Summit. Dr. Leeb and Ann Lee, who spoke in separate panel discussions, stole the thunder from the other panelists and panel sessions. Their words, separated by an hour, confirmed each other's message.

Red Alert on Commodities

In his book and at the summit, Stephen Leeb gets his point across: China holds 97 percent of rare earth metals. These are the elements that are used in everything from cellphones and computers, to wind turbines and solar panels.

In Red Alert, we learn the former rice paddy city of Guiya has become the e-waste capital of the world. Why is the recycling of mobile devices and computers important to China? The products are stripped so the specialty metals can be salvaged and reused in new devices. The U.S. military has been aware of the rare earth crisis since 2010. The rest of Washington, outside the Pentagon, is either indifferent, doesn't see a threat, or wants to punt the problem to the next generation, like funding social liabilities.

In the first two chapters, Leeb points to when the clarion sounded: December 2009 at the Copenhagen Conference on global warming. The salvo China fired that day? One word: "No." The passive-aggressive plan enabled China to "...deliberately wrap itself in the green mantle of environmentalism."

While China fooled the world into believing it was turning to renewable energy for environmental reasons, it was really erecting a smokescreen "to corner the market on natural resources."

That will have dire consequences for the U.S. and western nations sooner than their political leaders want to accept.

Red Alert is filled with fascinating facts and insights. A bar chart shows the limited life spans of Chinese mines from 40 years for tungsten and 30 years for copper, to a decade or less for nickel, zinc, silver, lead, and gold. Another graph shows China's oil consumption had tripled oil production in the dozen years of 1993 to 2005.

Every one talks about "peak oil," the author points out, but few discuss "peak coal." China, which wasn't on the radar in solar panel manufacturing or the desalination of seawater a decade ago, will soon become the world leader in both.

At the China Summit, Dr. Leeb said, "China will spend $5-6 trillion on renewable energy over the next eight years. When a country is growing rapidly it can mask past sins" -- a reference to the pollution caused by the recycling of e-waste. China appears willing to sacrifice towns and people for the long-term strength of the nation.

After the panel discussion, a TV crew from China interviewed Dr. Leeb to get more juicy sound bytes. With a passion on the subject that is matched only by Ann Lee, who was born in Hong Kong and raised in America, he said, "We need more Manhattan Projects for technology innovation and clean energy."

Catching up with Dr. Leeb

After the interview Leeb told me, "The U.S. isn't focused on the resources it needs for the future, while China is mapping its destiny."

The limits of 21st-century natural resources, from oil and water, to rare earth metals pose serious challenges to human civilization not seen before. It's even a greater risk to those nations that don't plan on long horizons to contest Chinese hoarding.

After reading Red Alert, it became clear the U.S. economic stimulus programs of the past few years have failed to arrest America's decline, let alone reverse it. Worse, by the government bailing out the broke states and underfunded pension plans, showing little ROI for such huge financial outlays, it has all but buried the real issue of a commodities' arms race.

In the new global economy, being Greece isn't the answer to securing America's future. The rhetoric in Washington should be less on economic recovery, more about launching a plan to blunt the threat China poses.

"China recognizes the gravity of the resource situation," Dr. Leeb wrote in a follow-up email. "It realizes it may require a strong military to secure those resources, as is the case with the South China Sea. But I think everything they do, or nearly everything, is informed by their understanding of what it will take to build a foundation to survive and thrive in the 21st century."

For more information about Dr. Stephen Leeb, please see this Wikipedia link:
http://en.wikipedia.org/wiki/Stephen_Leeb